Another day, another big announcement by Gov. Bruce Rauner, another rebuke by Democratic leaders.
Rauner and top Republicans unveiled on Thursday a new plan to reform the state's massively unfunded public pension systems. It's modeled, they say, on a plan championed by Senate President John Cullerton. But the effort seemed to fizzle out as the day went on.
The governor said he and Cullerton had spoken this morning and that he was optimistic Cullerton was on board and ready to move forward on this proposal. They say it will save $1 billion a year and start to cut into that massive $110 billion unfunded liability.
But as we learned later in the day, the deal was not to be: Neither of the state’s top two Democrats were on board.
Nonetheless, the proposal was put forth by the governor and the top Republican legislative leaders.
It would reform the pensions by giving state workers a choice.
The typical state worker could either choose to keep the current 3 percent compounded raises they receive in retirement, but they would have to accept a lower pensionable salary. That means any raise they get in the future would not factor into their pension. Or, vice versa: they could keep a higher pensionable salary but choose a lower cost of living raise in retirement.
The thinking is that a younger employee making less money will choose to keep raises but give up the cost of living adjustment (COLA), the older employee will keep the COLA but forgo future pensionable raises.
Republican leaders say this is the mirror image of a plan Cullerton has advocated for for years, one they all believe is constitutional.
“Today, I’m willing to take a leap of faith with the Senate president and to work with him and secure the votes in the House of Representatives to get a pension bill passed,” said House minority leader Jim Durkin (R-Westmont).
The governor and leaders also said they would rather see a pension bill that saves more money than this one, but that some reform is better than none.
“The savings here seems puny when we were talking about $20 or $30 billion under Senate Bill 1 [the law struck down by the courts],” said Senate Minority Leader Christine Radogno (R-Lemont). “But this is what’s available to us and $1 billion is nothing to sneeze at.”
The Illinois Supreme Court, in striking down the previous pension reform law, said firmly that pension benefits could not be diminished. On its surface, this plan would portend to make retirees choose between two diminished benefits. The solution to that problem is a workaround that involves collective bargaining changes with unions. Some say this is a poison pill.
Right now, unions can negotiate salary raises that get calculated into a worker’s final pension. The governor is advocating for taking that ability away from unions. It’s something the General Assembly can do by simply passing a bill.
These salary raises would no longer be guaranteed to workers. The state can come in and say, ‘We’ll guarantee that all your future raises can apply to your pension if you agree to give up the higher COLA. Or keep the COLA, but your pension will be based on the salary you have now – future salary raises won’t be included.’
It’s why Gov. Rauner says this wouldn’t diminish worker benefits.
“They are not guaranteed collective bargaining on anything,” Rauner said. “We have been willing to give that, but we can take anything out of collective bargaining, and we have. The state and city of Chicago have taken things out of collective bargaining. We’re removing one thing, I’d like to remove three or four.”
Cullerton says he believes there’s a way to keep the bill constitutional without the collective bargaining bit. In a statement, he said:
The plan he outlined at his news conference isn’t what we talked about. It’s not my plan. It goes beyond what we discussed and beyond what I support.”
Meanwhile, Speaker Madigan says:
The Governor said today that in exchange for negotiating on pension reform, he will continue to demand changes that will drive down the wages and standard of living of middle-class families. Despite the Governor’s desire to drive a wedge between Democrats in the House and Senate, neither President Cullerton nor I will agree to make changes proposed by the Governor that will hurt the middle-class families of our state.”
And public unions are opposed, the We Are One coalition saying:
Rauner's latest proposal is irresponsible and divisive. Slashing retirement security by forcing workers to choose between two diminished options is clearly unconstitutional.”
One House Democrat says the Supreme Court was clear – the only reform that will work for pensions is paying for them.
“The governor needs to leave the people’s pensions alone,” said State Rep. Mary Flowers (D-Chicago). “The governor needs to bring his friends to the table so we can talk about a financial transactions tax to bring real money to this state to help solve the problems that we’re having here.”
The governor also continued harsh words against speaker Madigan. He was asked how he expected to get the speaker to buy in if he kept blaming him for everything.
“The speaker has taught us well,” the governor said. “Peace through strength.”
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